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Massey Coal,Webster locked in tax battle


Publication: THE CHARLESTON GAZETTE
Published: Sunday, February 15, 1987
Page: P1A
Byline: PAUL NYDEN

A bitter battle over property taxes between A.T. Massey Coal and one of West Virginia's poorest counties may be resolved by the Supreme Court within a few weeks.

Webster County officials fear their county will go bankrupt if they are forced to return hundreds of thousands of dollars in property taxes already paid by some coal and lumber companies.

Dan O. Callaghan, a Richwood lawyer, challenged Webster County tax appraisals in court. A few out-of-state corporate landholders were singled out, he argued, and were handed much higher tax rates than anyone else.

Circuit Court Judge Danny O. Cline ruled against the county in November 1985 - reducing the appraised value of Massey's coal lands to $2.9 million from the 1982 selling price of $29.8 million.

Cline used a tax rate of $360 an acre recommended by the state Tax Department for undeveloped coal lands.

Two months later, Cline reduced the appraised value of Oneida Coal's lands in Webster County from $5.9 million to $2.8 million.

And in February 1986, he rolled back the assessor's action increasing values of timber lands from $35 to $50 an acre.

Last month, the case was argued before the state Supreme Court.

Lawyers Callaghan, W.T. Weber, Jr. and E.V. Morton, Jr.

represented the coal and lumber companies. Webster County Prosecutor Jack Alsop represented the county. Both sides filed long legal briefs.

"What better example of a bona-fide arm's-length transaction as to the true and actual value of real property exists," Alsop asks, "than two large coal corporations, not of a corporate relationship, dealing on the open market?" But East Kentucky Energy, Massey's land-holding subsidiary, claims county officials taxed their lands at far higher rates than comparable lands nearby. Oneida Coal, Shamrock Coal, Allegheny-Pittsburgh Coal - a Monongahela Power subsidiary, Sun Lumber and Pardee and Curtin Lumber joined Massey in the suit.

Callaghan says Massey owns 2 percent of all coal acreage in one district of the county and 20 percent in a second. But for tax purposes, the assessor ruled Massey must pay 11 percent of all coal taxes in the first district and 89 percent in the second.

Callaghan also calculates that tax assessments on Massey's 13 largest parcels of land rose from $36 an acre to $1,689 an acre between 1975 and 1984. Assessments on comparable coal lands increased from $27 an acre to $62 an acre during those same years, according to Callaghan.

Alsop, on the other hand, argues Massey coal lands contain proven coal reserves and that "comparable tracts" elsewhere in the county are taxed at lower rates because they do not contain proven reserves.

Massey refused to pay most of its taxes until the dispute is resolved. Several other coal and lumber companies paid their taxes under protest. Allegheny-Pittsburgh, for example, paid about $1.2 million under protest between 1976 and 1982.

The dispute began in 1974, when Allegheny-Pittsburgh bought almost 7,400 acres of coal lands for $24.6 million. Six years later, Allegheny-Pittsburgh sold the property to Massey for $29.8 million.

The county assessor began taxing the land based on its sale price "No evidence was ever presented to the assessorthat the true and actual value of the properties had decreased from the date of acquisition," Alsop argues. In Feb. 1985, a Massey geologist testified the land contains 32 million tons of strippable coal.

At $29.78 a ton - the average selling price of surface-mined coal in 1985 - Massey's Webster County coal would bring $953 million.

The assessor also raised assessments on property that had not been recently sold by 10 percent in 1976, 1981 and 1983 _ attempting to bring those assessments up to present market value.

Alsop argues that Cline ignored a recent state Supreme Court decision involving Randolph County timber lands. That decision held a taxpayer - such as East Kentucky Energy - may not get lower rates unless it proves "undervaluation" of comparable lands is "intentional and systematic." "There has not been an intentional and systematic undervaluation of any properties within Webster County," according to Alsop.

Even if some properties were undervalued, Alsop continues, the only legal remedy open to a company is "to seek an increase of those properties undervalued and to request the proper assessment of that property. But it has no legal recourse or remedy to keep its own assessments illegally low." But Callaghan argues that basing tax increases on recent sales means "more recent purchasers carry more of the tax burden.

This practice, known as the "Welcome Stranger Doctrine,' violates the "equal and uniform' provision of the West Virginia Constitution.

"In his brief, Callaghan criticizes Alsop for repeatedly reminding "this court that the effect of Cline's decision is aloss of needed tax revenue for Webster County. Such political arguments are irrelevant and immaterial." Some county officials see the conflict as one between local homeowners and small-business owners, on the one hand, and out-of-state corporations, on the other.

"Everybody better get their eyes open," said Joe Adams two years ago. Adams, who owns a funeral home in Cowen, is president of the county commission. "Out-of-state interests are buying everything around here. Then the land just sits there. You can't develop it. They're killing the community." Webster County already spends less for each of its school children than any other county in the state. Webster County teachers have the highest turnover rate in the state. Between 1983 and 1985, one of every three left.

"A verdict in favor of Massey and the companies would be devastating to a county this size," said James M. Durham, assistant schools superintendent.

A Supreme Court decision in favor of Webster County could have a devastating impact on statewide property tax reappraisal, Callaghan wrote in his legal brief.

Accepting the selling price of property "as conclusive evidence of value, in total disregard of the role of the state tax commissioner and the constitutional requirement of equality and uniformity of taxation," Callaghan argues, "would be an almost perverse repudiation of the reappraisal legislation this court so eloquently called for."
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